8 September 2008, Brussels EFCC Roundtable on the Review of the Financial Conglomerates Directive Elke Washausen-Richter, BaFin Discussion about Language

Introduction Article 2 FCD: 19 definitions of expressions that are important for Financial Conglomerates A precise formulation of these definitions is important for the uniform application of the FCD in the Community Three examples of definitions Participation - Art 2.11 Relevant Competent Authority - Art 2.17 Intra-Group Transactions - Art 2.18

Participation (Art 2.11) Definition: rights in the capital of other undertakings which, by creating a durable link with those undertakings, are intended to contribute to the companies activities or direct or indirect ownership of 20% or more of the voting rights or capital of an undertaking The term participation is important for the identification of a conglomerate and the supervision of risk concentration / intra-group transactions and capital adequacy

Questions about the term Participation: Should only participations of 20% or more qualify as participation or should qualitative criteria like durable link also be taken into account? What is a durable link? How should participations, which are not under the control of the financial conglomerate, be treated in the reporting about risk concentration / intra-group transactions? Participation (Art 2.11)

Relevant Competent Authority (Art 2.17) Definition: a)Member States' competent authorities responsible for the sectoral group-wide supervision of any of the regulated entities in a financial conglomerate b)the coordinator appointed in accordance with Article 10 if different from the authorities referred to in (a) c)other competent authorities concerned, where relevant, in the opinion of the authorities referred to in (a) and (b); this opinion shall especially take into account the market share of the regulated entities of the conglomerate in other Member States, in particular if it exceeds 5%, and the importance in the conglomerate of any regulated entity established in another Member State

Distinction between those authorities which are only Competent Authorities (Art 2.16) and those which are Relevant Competent Authorities (Art 2.17) with regard to the involvement in certain decisions, e.g. the identification of a conglomerate the calculation method for capital requirements thresholds and criteria for the supervision of risk concentration / intra-group transactions Different interpretations of Art 2.17 can influence the efficiency of the decision-making process. Relevant Competent Authority (Art 2.17)

Questions about the interpretation of Art 2.17 (a) Does responsible for the sectoral group-wide supervision.. mean 1.only authorities in charge of sectoral consolidating supervision at the top group level? 2.authorities responsible for the top group level (1.) and supervisors in charge of the supervision of consolidated sectoral subgroups within the FC? Relevant Competent Authority (Art 2.17)

Questions about the interpretation of Art 2.17 (c) Are the two criteria market share and importance in the conglomerate cumulative? How shall the market share percentage be calculated? Relevant Competent Authority (Art 2.17)

Intra-Group Transactions (Art 2.18) Definition: All transactions by which regulated entities within a financial conglomerate rely either directly or indirectly upon other undertakings within the same group or any natural or legal person linked to the undertakings within that group by close links for the fulfilment of an obligation, whether or not contractual, and whether or not for payment. The term intra-group transactions is important for reporting requirements and appropriate thresholds

Questions about the interpretation of Art 2.18 What kind of transactions should be supervised / reported? List of typologies of transactions? Does the definition include intra-group exposures? Intra-Group Transactions (Art 2.18)